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Amid Russia gas restrictions, UK Grid issues a warning that energy prices could soar

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Amid Russia gas restrictions, UK Grid issues a warning that energy prices could soar
Bloomberg

If Russia cuts off natural gas exports to Europe, Britain might experience “knock-on effects” such as skyrocketing energy costs, according to National Grid Plc.

The administration has thus far utilised the fact that only 6% of the UK’s gas imports come from Russia to downplay the dangers of lower supplies to the UK energy sector. This is the first time the grid operator has publicly addressed the threat posed by Moscow’s move to restrict fuel shipments.

Through its network of pipes to the continent and Norway, Britain’s gas market is connected to Europe, and summer prices are already four times higher than typical. Due to its little gas storage capacity, the UK is dependent on Europe for exports throughout the winter and is therefore vulnerable to future disruptions in Russian flows, which Kremlin sources predict will likely continue as revenge for European sanctions.

Increased costs would put additional pressure on consumer bills, which are already anticipated to hit record highs in October before rising once more in January. There is increasing pressure on the government to take additional action beyond the already-promised £400 household tariff decrease.

It will also be harder to keep the lights on. This year, it’s anticipated that system margins, or the buffer that National Grid must maintain in reserve, would decrease. According to the study released on Thursday, the network operator’s base case margin is now 6.7 percent, or 4 gigawatts, down from 7.3 percent last year.

European homes, businesses, and industry may suffer even more if energy prices rise, as they are already suffering from a rise in living expenses brought on by the highest inflation rates in decades. Germany, the largest economy in Europe, has already activated two steps of its gas emergency plan and could do so again if the situation clearly worsens.

When supplies are low, the UK will have to rely on importing electricity via its power cables to France, Norway, Belgium, and the Netherlands.

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